The UAE port deal should go ahead

In order to help fund the massive bid, Dubai Ports, Customs & Free Zone Corporation (PCFC) have launched the world’s largest sukuk, or Sharia-compliant bond. What was intended as a US$2.8 billion issue has instead rocketed to US$3.5 billion, after an overwhelming response from investors. Lead-managed by Dubai Islamic Bank (DIB) and Barclays Capital, the distinctive sukuk is also the first convertible instrument in the Islamic finance market.

The issue is just one of a series of initiatives designed to boost the PCFC’s corporate activities, ongoing business development needs and expansion plans. Its unique convertible structure allows partial redemption of up to 30% in the form of equity shares of the PCFC entities as and when they go for a Public Equity Offering within the next three years. If no Public Equity Offering takes place prior to the final redemption date, investors will be compensated with a higher yield.

The result will be a massive UAE investment in America. This is a good thing. It gives them an incentive to keep America safe, not because they love us, but because it would cost them big bucks if there were more attacks on the US.

Ownership does not give control over operations. At NRO, James Jay Carafano explains:

Foreign companies already own most of the maritime infrastructure that sustains American trade — the ships, the containers, the material-handling equipment, and the facilities being sold to the Dubai company. It’s a little late now to start worrying about outsourcing seaborne trade, but congressional hearings could serve to clear the air.

Sure security is important. That’s why after 9/11, America led the effort to establish the International Ship and Port Security code that every country that trades with and operates in the United States has to comply with. And compliance isn’t optional—it is checked by the U.S. Coast Guard. And the security screening for the ships, people, and cargo that comes into the United States is not done by the owners of the ships and the ports, but by the Coast Guard and Customs and Border Protection, both parts of the Homeland Security department. Likewise overall security for the port is coordinated by the captain of the port, a Coast Guard officer.

What happens when one foreign-owned company sells a U.S. port service to another foreign-owned company. Not much. Virtually all the company employees at the ports are U.S. citizens. The Dubai firm is a holding company that will likely play no role in managing the U.S. facilities. Likewise, the company is owned by the government, a government that is an ally of the United States and recognizes that al Qaeda is as much a threat to them as it is to us. They are spending billions to buy these facilities because they think it’s a crackerjack investment that will keep making money for them long after the oil runs out. The odds that they have any interest in seeing their facilities become a gateway for terrorist into the United States are slim. But in the interest of national security, we will be best served by getting all the facts on the table.

Let’s assume the nay-sayers are right and the deal allows a Muslim terrorist group to smuggle a container containing, say, a dirty bomb into a US port. Because the container would have to go through two radiation detectors, it is unlikely it would get out of the port area. So, to be of any use, the bomb would have to be detonated inside the port. Poof! There goes Dubai Ports World’s $3.5 billion dollar investment.

If there was an attack somewhere else on US interests and there was any link to the owners of Dubai Ports World, which is not entirely unlikely given the track record, the US could launch its most potent weapon against them – that horde of locusts otherwise known as Trial Lawyers. It’s a lot easier to execute a judgement if the assets to be siezed in compensation are located in the US.

The biggest challenge we face in the war on Radical Islam is to modernise and moderate Islam. Making Muslim countries part of the global economy is part of that process. Standing in the way of deals, such as the Dubai Ports World takeover of P&O, is not in our best interests. It reeks of hypocrisy; the same sort of hypocrisy that prevents third world countries from exporting their agricultural products to the EU and US.